Unit 3

Question 1

Cash flow statement

Answer 1

One of the three major financial statements, it uses the information from the income statement and the balance sheet to determine how much cash the firm has generated and how that cash has been allocated during a period of time

Question 2

Operating activities

Answer 2

Daily activities of a company involved in producing and selling its product, generating revenues, as well as general administrative and maintenance activities

Question 3

Investment activities

Answer 3

An account of cash used in the purchase of long-term assets that will deliver value in the future

Question 4

Financing activities

Answer 4

Shows the flow of cash between investors and creditors and the company. The net flows of cash that are used to finance the company.

Question 5

Retained earnings

Answer 5

The accumulated profits a company has earned over time that it has chosen to retain and use for its own purposes (future use) and shareholder’s equity rather than paying them out to shareholders

Question 6

Payout ratio

Answer 6

Proportion of earnings a company pays its shareholders in the form of dividends, expressed as a percentage of the company’s total earnings